Globalization With Asian Characteristics

As the West retrenches into populism and nationalism, can Asia take up the mantle of global cooperation?

By Chietigj Bajpaee for The Diplomat

July 20, 2016

The same week the results of Britain’s referendum to exit the European Union (EU) were announced, the Asian Infrastructure Investment Bank (AIIB) held its first annual meeting. These seemingly unconnected events are an indicator of the changing dynamics of globalization. To put it simply, the West is gradually ceding its role as a driver of globalization to the east and Asia in particular. This comes amid an anti-elite backlash in the West, which has been most notably evidenced by the recent Brexit vote but also demonstrated by the rise of politicians with protectionist platforms such as Donald Trump and Bernie Sanders in the United States, Jeremy Corbyn and Nigel Farage in the United Kingdom, Marine Le Pen in France, Geert Wilders in the Netherlands, and Pauline Hanson and Nick Xenophon in Australia. While these individuals may be regarded as fringe, anti-establishment voices, their views have become increasingly mainstream. This is evidenced by the fact that even seemingly moderate politicians are pandering to such views, as noted by U.S. presidential candidate Hillary Clinton criticizing NAFTA and the Trans-Pacific Partnership, despite her extensive history with both free trade agreements. This has led several leading Western powers to place a growing emphasis on protecting national self-interests over projecting global norms, values and institutions. In contrast, the national interests of Asian powers are increasingly intertwined with promoting international trade and regional cooperation and protecting the global commons.

Of course it would be premature to claim that Asia has assumed the mantle of leadership on the globalization debate. If anything, the short to medium term will witness a retrenchment of globalization as Western states become increasingly inward-looking while Asian countries are in no position to fill the void. This will lead to the growth of ungoverned spaces, a breakdown of global norms and institutions, and an inability to tackle transnational threats. This is already evident by the growing arc of instability emanating from the Middle East and the fact that global trade growth is now less than global economic growth. Challenges in combating transnational threats such as terrorism, nuclear proliferation, and climate change will only reaffirm this trend.

However, as any student of world history knows, the international system abhors vacuums and any void will eventually be filled by new and emerging powers. In this case, Asia is the obvious candidate and there are several signposts that point to this trend.

The first sign of Asia’s role in shaping globalization are developments at the regional level. Ironically, Britain’s exit from the European Union and concomitant weakening of the European project may actually serve to reinforce regional cooperation in Asia. This comes as states seek to minimize the adverse effects of a global economic contagion through strengthening regional financial safety nets and self-help mechanisms with greater macroeconomic policy coordination. In this context, initiatives such as the Chiang Mai Initiative currency swap agreement, Asian Bond Market Initiative, and ASEAN+3 Macroeconomic Research Office may be strengthened.

Learning the lessons of the European debacle, certain “red lines” are likely to be drawn in Asia with greater emphasis on regional cooperation over regional integration and making globalization a less elite-driven process by conceding to public concerns. In this respect ASEAN’s soft institutionalization may prove to be a more durable model of regional institution building than Europe’s supranational and intrusive bureaucracies that impinge on the principles of national sovereignty and territorial integrity. Institutions that were initially perceived as mere talk shops (ASEAN) and unlikely to last (Shanghai Cooperation Organization) have persisted and gone from strength to strength. While Western institutions such as the European Union and NATO may have served as the inspiration for Asian regional initiatives such as ASEAN, the East Asia Summit and ASEAN Defense Ministers’ Meeting-Plus (ADMM-Plus), the latter may ultimately take the reins in defining the process of intra- and eventually inter-regional cooperation and global policy coordination.

Externally-oriented

Another indication of Asia’s role in driving globalization is the fact that Asian countries – whether bilaterally or through multilateral lending institutions such as the AIIB and Asian Development Bank (ADB) – are increasingly looking beyond their shores and regions in seeking economic opportunities. The AIIB announced four development loans during its inaugural meeting. This included co-financing three projects with the World Bank, ADB, and European Bank for Reconstruction and Development, as the AIIB seeks to build up its capacity and incorporate the best practices of existing multilateral development banks. The AIIB projects include a highway construction project in Pakistan, road rehabilitation in Tajikistan, and slum development in Indonesia. Moreover, the AIIB’s lending activities are unlikely to be confined to Asia as future applicants include more countries from Africa, Latin America, and Europe. The AIIB is also likely to seek improvements on existing practices of multilateral development institutions by expediting lending processes.

A similar outward engagement has been witnessed at the bilateral level. The Japan Bank for International Cooperation (JBIC) has relaxed its lending requirements to facilitate investment in projects that it may have otherwise neglected. Through a change to JBIC’s operating charter, a newly established special fund will invest in higher risk infrastructure projects. This is part of a broader government plan, known as the Quality Infrastructure Initiative, which aims to increase overseas lending by Japanese-funded development institutions, including JBIC, the ADB, and Japan International Cooperation Agency (JICA) to allow Japan to more effectively compete with its Chinese counterparts. This comes in the aftermath of Japan’s loss of a tender to China in 2015 for the Jakarta-Bandung high-speed rail project after the China Development Bank (CDB) decided to forego the need for a sovereign guarantee from the Indonesian government, which was required by the JBIC-led consortium.

With respect to China, in addition to the AIIB, China’s “Belt and Road Initiative” is further evidence of its growing role in intertwining its growth and development agenda with that of its broader periphery. The country is already leading the way in international development finance, with overseas lending by the China Development Bank (CDB) and Export-Import Bank of China matching that of the six major Western-backed development institutions, with the CDB alone overtaking the World Bank as the world’s leading provider of international development finance. When combined with the AIIB, BRICS New Development Bank, and over a dozen regional funds, Chinese development financing far exceeds that of all Western-led multilateral development institutions combined.

Even India has developed a more proactive, pragmatic and omni-directional policy of external engagement under Indian Prime Minister Narendra Modi, aimed at engaging all major poles of influence in the international system, as well as reaching out to Indian diaspora communities. Modi has visited 32 countries in less than two years with the objective of highlighting the attractiveness of the Indian economy and strengthening regional connectivity. This has been done in order to support his economic development goals and facilitate Modi’s “Make in India,” “Digital India,” and “Smart City” initiatives.

Modi’s recent four nation tour of East Africa has been the most recent evidence of this. Although India’s $70 billion in trade with the African continent pales in comparison to China’s $200 billion, India has sought to exploit the country’s historical relationship with the continent, such as the 1.3 million Indian diaspora population in South Africa. Despite the hype associated with China’s emergence as Africa’s leading trade and investment partner, India has so far avoided the allegations of neocolonialism that have often been associated with China’s interactions with the region. While China and India are both seeking to secure markets and commodity imports from Africa to meet their growth and development needs, India’s model of engagement with Africa has been distinct from China’s, with a greater emphasis on capacity building, private sector interaction, and maintaining a lighter footprint. This has served to deter the level of blowback that has been seen in China’s engagement with the continent where there has been more emphasis on government-to-government interaction and reliance on imported Chinese labor for local projects.

Challenges and opportunities for change

To be sure, this so-called Asian process of globalization is still in its nascent stages. A survey by AidData notes, for instance, that despite China providing almost $95 billion in aid and other official financing to Africa between 2000 and 2013, traditional providers of aid and development assistance such as the IMF and World Bank ranked higher than Chinese institutions on their “agenda-setting influence.” Negotiations for the TPP trade agreement (which presently excludes both India and China) also demonstrate the continued ability of the United States to set the standard on global free trade negotiations, as the TPP raises the bar for future multilateral trade agreements.

Similarly, despite the hype associated with the launch of new Asian-led global governance initiatives, Asia remains far from usurping the long-standing U.S. role as provider and protector of global public goods. This alludes to the fact that while mercantilist self-interest has been the driver of Asia’s outward engagement, Asian states will have to increasingly consider their role in protecting the global commons, as to date they have largely played the role of a free rider. In other words, while the focus of Asia’s outbound engagement is so far concentrated in the economic domain, the strategic implications cannot be far behind. There is already evidence of this: Japan’s reinterpretation of its pacifist constitution toward facilitating collective self-defense has given the country’s Self-Defense Forces the mandate to expand overseas operations. Meanwhile, China’s 2015 defense white paper makes reference to the need to protect Chinese “institutions, personnel and assets abroad,” which has been operationalized with a counterterrorism law that was passed in December 2015 that lays the groundwork for the PLA to be sent abroad on counterterrorism operations.

Moreover, there are several risks along the way before Asia assumes the reins of globalization. Foremost among these is the fact that one of the countries that is a key driver of this process – China – is still regarded with apprehension by much of the international community. The recent ruling by the Permanent Court of Arbitration at The Hague challenging the validity of China’s”nine-dash line claim to the South China Sea illustrates China’s role as a potential spoiler in enforcing the international rule of law. With Europe and the United States potentially retreating into a shell, emerging powers such as China may be further emboldened to challenge international norms and institutions. This alludes to the fact that what threatens regional cooperation in Asia is not so much the intrusive bureaucracies of supranational institutions (as seen in Europe) but rather great power rivalries. This is evident by the growing pressures on ASEAN unity amid the rise of China and tensions in the Sino-U.S. relationship.

Nor is there a clear Asian consensus on global norms, values, and institutions. Asian powers such as China, India, and Japan have distinctly different views of global governance rooted in their unique civilizational identities and differing development priorities: Japan is a industrialized country firmly entrenched within the Western neoliberal order trying to escape the shackles of the “lost decades” of stagnant growth; China is a leading global but still emerging economy seeking to export excess industrial capacity as the country adapts to a “new normal” of more consumption and service-driven growth while rekindling its historical status as “middle kingdom”; and India is in the position where China was two decades ago with a focus on attracting foreign investment to upgrade the country’s infrastructure and manufacturing capacity while maintaining its status as an independent pole of influence in the international system through a policy of non- or omni-alignment and strategic autonomy. This has resulted in differing positions on issues as varied as climate change, trade, and development.

Furthermore, a so-called Asian-driven process of globalization would not necessarily repudiate the Western-driven process of globalization that has existed over the last two centuries. In a speech during his visit to China in May 2015, Modi acknowledged this by noting that China and India “have gained a lot from an open, rule-based global trading system” and “equally, we have most to lose if it breaks down.” As such, an Asia-led process of globalization is likely to entail a reinterpretation rather than complete repudiation of existing norms and values. Certain principles that were seen as increasingly out-dated in the West – such as respect for state sovereignty and territorial inviolability – will be reaffirmed. Others related to human rights may undergo a process of reinterpretation as principles such as the “responsibility to protect” come under growing scrutiny. In this context, countries such as India and Japan are uniquely placed to play the role of potential “bridging powers” in debates on global governance, challenging the simple duality of a so-called “Washington Consensus” (characterized by democracy, neoliberalism, and free market capitalism) and “Beijing Consensus” (characterized by “no-strings attached”/ value-neutral, state capitalism).

At the same time, a common thread can be identified among all Asian countries in their discussions about globalization and global governance. This is rooted in the need for a more equitable distribution of power and desire to reform existing international institutions and/or create new ones to reflect the growing diffusion and decentralization of global power. Rather than being merely content with a having a seat at the table, Asian powers increasingly want to be able to shape the agenda as well. This entails reforming the balance of power within existing institutions such as expanding the permanent membership of the UN Security Council to include such countries as India and Japan, admitting India to the Nuclear Suppliers Group, and increasing the voting share of emerging economies such as India and China at the Executive Board of the International Monetary Fund. However, it also entails creating new institutions such as the AIIB and BRICS New Development Bank.

As such, despite inevitable uncertainties and hiccups along the way, the trajectory seems clear. As in the case of the global powers of yesteryear, Asian countries’ domestic and foreign policy interests are becoming increasingly intertwined. And as the west turns inward and Asian states increasingly see their national interests overlapping with global norms, values and institutions, Asia is poised to assume the reins of leadership in driving globalization in the 21st century.

Chietigj Bajpaee is a doctoral candidate in the Department of War Studies at King’s College London. He has worked with several public policy think-tanks and political risk consultancies.